Multi Donor Trust Fund-Southern Sudan Final Minutes of the Oversight Committee Meeting May 10, 2007

Transcription

1 Multi Donor Trust Fund-Southern Sudan Final Minutes of the Oversight Committee Meeting May 10, The Oversight Committee (OC) met on May 10, 2007 in Juba under the chairmanship of HE Gabriel Changson Chang, Acting Minister of Finance and Economic Planning. Ms. Liz Gaere, Head of the Joint Donor Team co-chaired. The Box below lists the key decisions. Participants are listed in Annex 1. Box: Summary of Key Decisions Follow-up to the OC s decisions on March 13: MoFEP to follow up on (i) seeking feedback from GoSS Ministries on the draft Results Matrix for 2007, (ii) issuance of a circular to Ministries defining the role of the GoSS Procurement Agent, and linkages with other procurement staff/advisors, (iii) increasing staff of the Procurement Agent, (iv) the arrangements for tracking/monitoring the progress of ongoing major contracts in MDTF projects, and (v) monitoring the Procurement Agent s turn around times for optimum results (paragraph 3 (c), Minutes of the OC meeting on March 13, 2007). Use of information from the Results Matrix: MDTF TS to liaise with the Ministry of Presidential Affairs and Bearing Point to discuss how information from the Results Matrix could be fed into the Annual Action Plan reviews mechanism in order to regularly inform the Council of Ministers on MDTF implementation. Minutes of the March 13 OC meeting were approved with the provision that discussion on the proposed FPP for Agriculture and Forestry Development project would be initiated in the light of MoFEP s priorities and available financing. The Joint Implementation Support Team would also (i) suggest robust arrangements for regular monitoring of progress and results of the projects being implemented by UN agencies, (ii) recommend an appropriate role for the MDTF Monitoring Agent, and (iii) brief an informal group of the OC members at a meeting chaired by the Minister, MoFEP on its findings/recommendations. Role of Monitoring Agent: The MDTF TS, in consultation with the MoFEP and taking into account recommendations of the Joint Implementation Support Team, would prepare a proposal for OC s consideration. PPF: The MDTF TS would prepare an options paper incorporating best practice for OC s consideration. New pledges by donors: All major donors would closely track progress towards the additional pledges well ahead of the next Sudan Consortium, and would advise the OC as soon as information on potential commitments is available. Front loading MDTF contributions: The OC approved the MoFEP s proposal for the front loading of MDTF contributions during Q2 and Q3 of 2007 to give space to the MoFEP for cash flow management. The EC gave its approval subject to further assurances that the education project would still be able to disburse at previously planned rates under the proposal. Prioritization of development needs for MDTF financing: Availability of donor support outside the MDTF needs to be considered for arriving at a sector balance. The EC noted that as its current MDTF funding was principally intended for investments in education and rural infrastructure, this could have implications for future decisions. continued on next page 1

2 Cost sharing ratio: The OC deferred consideration of the MoFEP s proposal to change the sharing ratio to 50:50 for new projects and phases of existing projects, pending further rigorous assessment of revenue flows of the GoSS, donor contributions and project requirements. The OC, however, acknowledged in principle the potential need to review the ratio in light of the changed fiscal parameters. A High Level Forum was proposed for wider consultations between the GoSS and the donor community on the issue of development finance and other requirements such as support for the DDR and the SPLA for Southern Sudan. The GoSS requested the JDT to act as focal point, and the Forum to also include MoFNE, GoNU, and CBS. Census: (i) The OC emphasized the need for a clearly defined process for it to be associated with the processing of the Phase II FPP. The OC asked MDTF-S TS to define the process in consultation with MDTF-N TS so that the OC-S remains fully informed and involved in the appraisal and approval process in the North. (ii) The OC-S also noted that according to UNFPA and UNOPS, January 2008 appeared a more practical and appropriate time for the census. New Private Sector Development and Currency Projects: The OC approved FPPs for these two projects. EC would provide detailed comments on the PSD project, to be taken into account during project implementation. The MDTF, GoSS and donors will continue to communicate actively as the implementation phase gears up. MDTF-S TS Budget for CY2007: The OC approved a budget of $7.163 million. Topics for future discussion: Community Driven Development, South Sudan Reconstruction and Development Fund, Agriculture and Forestry FPP after it has been reviewed by IMAC, and PPF for the HIV/AIDS IPP. 2. Ms. Gaere welcomed the new Chairman (for whom it was the first meeting of the OC) on behalf of the members of the Committee, and welcomed other new members: HE Luka Biong Deng, Minister for Presidential Affairs, HE Benjamin Marial Benjamin, Minister for Regional Cooperation (who was unable to attend), HE Mary Kiden, Minister for Gender, Social Welfare and Religious Affairs (who was unable to attend), and HE David Mayo, Chairperson of the Southern Sudan Reconstruction and Development Fund. Agenda and Minutes 3. The minutes of the OC meeting on March 13, 2007 were discussed: a. EC informed that the Education Sector Strategy Paper/Aide Memoire of the Joint Assessment on Education has been made available to the Minister for Education, Science and Technology and would be circulated to the OC (Annex 2). EC also noted that inclusion of the Agriculture and Forestry FPP as one of the projects which should not be delayed seemed contrary to the pipeline priorities of GoSS. It requested clarification of what exactly approval would mean in terms of funding. b. HE David Mayo highlighted the urgent need for coordinating and managing the procurement process within GoSS and dove tailing disparate procurement specialists with the work of Crown Agents-GoSS Procurement Agent and for ensuring that staffing of the Procurement Agent is sufficiently increased. The Chair emphasized 2

3 that capacity was immediately required to manage procurement transparently and efficiently which was why GoSS has appointed a Procurement Agent and all the human resources available within GoSS would be suitably coordinated to speedily implement procurement in line with the applicable Procurement Regulations. c. The OC highlighted the need to focus on implementation of the key decision points recorded in the last meeting on March 13: (i) Ownership of expected results from MDTF projects -- The draft Results Matrix had been circulated for all MDTF projects but feedback was still awaited from GoSS, (ii) Making procurement work -- It had been decided that a circular would be issued to all ministries in GoSS defining the role of the Procurement Agent and clarifying the inter linkages with other Procurement staff/specialists so that all GoSS ministries have a common appreciation of procurement arrangements, (iii) It had been decided that there was need to immediately increase the capacity of the Procurement Agent for which GoSS would issue suitable directions to Crown Agents, and (iv) It is necessary to also keep track of and closely monitor ongoing major contracts in the MDTF projects, and to monitor the Procurement Agent s turnaround times for optimum results. d. HE Luka Biong Deng suggested that along with the regular and intensive monitoring of the Results Matrix of MDTF projects, it would be appropriate to identify how this information could be fed into the Annual Action Plan reviews being managed by Bearing Point and the Ministry of Presidential Affairs. He noted the Council of Ministers would welcome regular reporting on MDTF implementation using this mechanism. Decisions MoFEP would follow up on the four action points listed in 3.c above which were identified in the March 13 OC meeting. MDTF TS would discuss with the Ministry of Presidential Affairs and Bearing Point on how information from the Results Matrix could be fed systematically into the Annual Action Plan reviews mechanism for the Council of Ministers. The minutes were approved with the provision that discussion on the proposed FPP for Agriculture & Forestry would be initiated in the light of MoFEP priorities and available financing. Operational Items 4. Status of MDTF operations a. The MDTF TS reviewed the status of MDTF projects and highlighted the progress made in the last few months. Large contracts have recently been awarded by GoSS: about $35 million in Health, $20-25 million in Infrastructure, and a number of contracts are due to be concluded soon in the education project. Despite the need to continue to streamline procurement, there has been considerable improvement and progress in project implementation and disbursements. 3

4 b. Significant improvements have also been made in improving communication and in managing the project cycle better. The suggestion of HE Luka Biong Deng to institutionalize MDTF results monitoring and reporting into the GoSS system for tracking progress of projects was welcomed. The OC also noted the need for continued attention to the following five critical areas: (i) Procurement, (ii) Contract management, (iii) Accelerating decision making -- the World Bank has implemented a number of steps to reduce decision time, and these efforts as well as efforts by GoSS should be continued to streamline processes and make decisions time bound and thereby reduce implementation time for projects, (iv) Management of cash flows to ensure that project implementation continues without disruption, and (v) Expanding the support to the states, initially for monitoring implementation of existing projects but also with a view to enlarging the area of MDTF support in the near future. c. The Co-chair endorsed the assessment and observed that one of the beneficial impacts of the deliberations during the recent Governors Forum was that the states had had an opportunity to discuss the MDTF and had raised important issues concerning the design of key projects. The fact that HE Minister of Finance for Central Equatoria was in attendance at this OC was welcomed as a beneficial development. d. The Chair identified some guiding principles for design of MDTF projects: (i) They must supplement GoSS financed projects and be complementary to them, (ii) projects must ensure balanced interventions across sectors of the economy, (iii) projects must aim at achieving a regional balance in development, (iv) speedy, transparent and efficient decision making would be critical for developmental efforts, and (v) GoSS is committed to transparency and efficiency in its functioning and encourages participative decision making including, where appropriate, the Economic Cluster of Ministries, the Council of Ministers and the Southern Sudan Legislative Assembly. e. HE Luka Biong Deng highlighted the role of effective monitoring, as is being done under MDTF projects by the Monitoring Agent, not only in identifying the key outputs and outcomes to be measured but also the actual progress against the results matrix. f. The EC sought clarification on whether Unicef would be able to recycle funds for support to the education sector that it had not used under the Rapid Impact Emergency Project, due to additional finance from the Government of Japan. Unicef stated the funds had now been returned to the MDTF. It was later clarified that Unicef still regards the funds as allocated to education, and will be submitting proposals on how to use them. The EC noted that the Ministry of Education, Science and Technology has difficulty with the distribution of text books and this was an area in need of major support. 5. Implementation Support Mission (ISM) a. Kanthan Shankar, Team Leader, briefed the OC on the objectives of the joint team s work in Juba -- providing support in real time to resolve implementation problems in the ongoing projects, identifying potential areas for developing responsive operational policies to speed up implementation, and providing real time support for better appreciation of the recently developed Operational Policy 8.0 which is specifically tailored to provide a rapid response in emergency situations. The OC Members welcomed the initiative. 4

5 Decisions The ISM would meet separately with UNDP for resolving outstanding issues on monitoring arrangements for the Police and Prisons Reform project. The ISM would suggest robust arrangements for regular monitoring of progress and results on projects being implemented by UN agencies. The ISM should recommend an appropriate role for the MDTF Monitoring Agent. The ISM would brief an informal group of the OC members at a meeting to be chaired by the Minister of Finance and Economic Planning on the results of the work of the joint team, on Friday, May 18, Report of the Technical Working Group (TWG) a. The Director, Aid Coordination, MoFEP briefed the OC on the progress. The TWG had two tasks each of which were taken up separately: (i) Role of the Monitoring Agent: Four options have been identified by the TWG but the issue has yet to be considered by the MoFEP internally. The current status is of work in progress. Once MoFEP has considered the recommendations, an options paper will be prepared for the OC s consideration. (ii) Project Preparation Facility: The TWG was of the view that a case by case approach should be used for considering funding for project preparation support at the time of IPPs. b. EC identified potential problems if a loosely defined case by case approach is adopted. At the simplest level, how could project funds be accessed before the project is approved? The process to be adopted for getting access to the PPF needed to be identified and defined, including whether project preparation activities would need to be approved by the IMAC. The volume of funds to be made available for this purpose would also need to be defined; an initial proposal for the proposed HIV/AIDS project has indicated the need for about $2 million in PPF support. Decisions MoFEP would take into account the recommendation of the TWG on the Role of the Monitoring Agent. The MDTF TS, in consultation with the MoFEP and taking into account recommendations of the Joint Implementation Support Team (ISM), would prepare a proposal for consideration by the OC. On the PPF, the MDTF TS would put up for consideration of the OC an options paper incorporating best practice. 5

6 7. GoSS/MDTF Cash Flow Projections a. The Director, Aid Coordination, presented the MoFEP s projections for inflows and project disbursement requirements (Annex 3), based on which three issues were raised: (i) The requirement for funds, even considering only the phases of the existing projects, far exceeds the donor commitments of $343 million; and donors, by April 30, 2007, had paid in $252 million. What would be the time line and the volume of additional support expected from donors? (ii) Given the difficult fiscal situation of GoSS, caused by major shortfalls in oil transfers in the first quarter and expanded expenditure plans, the original ratio of two (GoSS) to one (MDTF) in financing MDTF projects was no longer feasible. Would donors consider a new ratio of 50% (GoSS) and 50% (MDTF) for the financing of new phases of existing projects (e.g., health, education, and infrastructure)? (iii) The revenues of GoSS are sharply and severely constrained during Q1 and Q2 of The Chair informed that not only were oil revenues lower than expected in 2007 but there was a declining trend with oil revenues decreasing from $76 million in January 2007 to $40 million in March Accordingly, it was proposed to front load the MDTF contributions on the following basis: MDTF contributions to be significantly higher during Q2 and Q3 of 2007 with a conversely lower contribution for GoSS. GoSS to assume a major burden of financing MDTF projects in Q4 of 2007 by contributing more to make up the shortfall in its contributions in the previous two quarters. GoSS has undertaken to ring fence the existing GoSS contribution in the pooled account of the education project which can also be used as needed for fast tracking Phase 2 of the education sector program. b. The Minister of Finance and Economic Planning saw this discussion as the beginning of a more coordinated, collaborative approach to a long-term and complex issue, and urged the donors to adopt a flexible position. c. The proposal received strong support from HE Luka Biong Deng and HE David Mayo, who highlighted that adopting a flexible approach towards the cost sharing ratio was in line with the broad objectives of the CPA. The JAM financing need estimates, on the basis of which the original cost sharing ratio was determined, did not take into account the needs of the DDR and the modernization and rationalization of the SPLA. Continued security concerns were forcing the GoSS to spend considerable amounts on the security forces. If adequate donor financing for development is not forthcoming, the only option for GoSS would be to resort to loans. This option was being seriously explored as a fall back and a last resort measure. Donors were 6

7 requested to adopt a long-term perspective and consider development finance requirements to d. The World Bank strongly supported a realistic assessment of the development needs of Southern Sudan, which were many times larger than the financing requirements for next phases of the ongoing MDTF projects. It also noted that a flexible approach was needed in the current fiscal context and to meet the huge development needs of South Sudan. e. The Joint Donor Team enquired about the basis for assuming that the reduction in revenues was temporary and reversible. Canada had similar concerns and was of the view that front loading MDTF contributions during 2007 makes sense only if there is a realistic assumption that revenues would pick up in Q4, HE the Minister of Finance and Economic Planning clarified that: The trend of declining oil revenues is expected to be reversed towards the end of the year by when MoFNE, GoNU estimates that the existing production bottlenecks will be resolved and the oil revenues will increase. GoSS is putting in place strong measures to control expenditures, particularly through cash management controls, and payroll. GoSS is expanding its collection of non-oil revenues for which detailed administrative measures are being implemented. f. The representative from the MoFNE, GoNU indicated that the original cost sharing ratio was never intended to be applied to individual projects but should be applied only to the global availability of development funds. So long as Government funds are made available to the required extent for development projects, the actual cost sharing in MDTF projects should not be a matter of concern. g. Donors reviewed the likely timing of future pledges and agreed that, if possible, commitments for the MDTF-S for 2008 should be finalized by all the major donors ahead of the next Sudan Consortium. The JDT advised that it would be reviewing its future support strategy in the Hague next week; formal pledges may not be made ahead of the Consortium, although the partners have been made aware of the pressing need for commitments for the MDTF-S; and the EC country strategy is being prepared and in principle will be approved by the EU member states in the summer while Canada confirmed that the new support for the next three years would be finalized by July-August Decisions All the major donors would closely track progress towards the additional pledges well ahead of the next Sudan Consortium, and would advise the OC as soon as information on potential commitments is available. The MoFEP proposal for front loading MDTF contributions during Q2 and Q3 of 2007 to give space to the MoFEP for cash flow management was approved. The EC 7

8 gave its approval subject to further assurances that the education project would still be able to disburse at previously planned rates under the proposal. In prioritizing development needs, the availability of donor support outside the MDTF needs to be considered for arriving at a sector balance. The EC noted that as its current MDTF funding was principally intended for investments in education and rural infrastructure, this could have implications for future decisions. The MoFEP proposal to change the sharing ratio to 50:50 for all new projects and phases of existing projects was deferred pending further rigorous assessment of the revenue flows of GoSS, donor contributions and project requirements. However OC acknowledged in principle the potential need to review the sharing ratio in the light of the changed fiscal parameters. There was an urgent need for wider consultations between the GoSS and the donor community on the issue of the development finance and other requirements of Southern Sudan. MDTF was a significant, but not an exclusive component, in such consultations. Particularly in the context of support for the DDR and the SPLA, there would be a need for developing a wider consensus. A High Level Forum was proposed at the earliest opportunity. The GoSS requested that the Joint Donor Team act as focal point, and that the Forum also include the GoNU Ministry of Finance and National Economy, and the Central Bank of Sudan. 8. Update on the Census a. The representative of the UNFPA provided a detailed account of the current status of the project (Annex 4). The intention to hold the census in November 2007 had recently been reaffirmed by the Presidency, severely limiting the flexibility for managing preparation. He highlighted the need for release of timely and sufficient funds from GoNU and the MDTF and the conclusion of the field mapping exercise if the target of a census in November 2007 is to be met. This would be very difficult without extra resources. He also noted that extra GIS assistance might be required to ensure sufficient numbers of area maps for enumerators. The onset of rains in the South was a major logistical challenge. b. Members were informed that MoFNE, GoNU has given a No Objection to UNFPA to implement Phase II of the MDTF project, and the appraisal of UNFPA s FPP is scheduled for June in Khartoum. c. The MoFNE, GoNU stated that it would be releasing funds to the census every two weeks from now, to ensure adequate cash flow. d. EC and JDT were of the view that the Phase II approval for the project needed to include consultation with the OC in the South as well as the centre, so members are aware of the details of project implementation and are assured that the implementation strategy ensures timely completion. They also reminded the meeting that a No Objection from MoFEP as well as MoFNE was required. HE Luka Biong Deng supported the need for a review of the Phase II, by the OC for the MDTF-South. It was noted that the SSCCSE had been associated with the 8

9 consultations and technical discussions in Khartoum. UNFPA should circulate the FPP to donors in the South also and donors could participate in the appraisal process in the North so that all decisions are participative and OC-South remains informed of the project progress. e. The Oversight Committee was reminded of the four conditions for phase 2 implementation that had been agreed at the OC-N in December 2006: 1) GoNU had to release its outstanding funds from 2006, 2) GoNU had to produce a schedule for disbursement in 2007, 3) UNFPA had to produce detailed financial management proposals for phase 2, and 4) GoNU and GoSS both had to give No Objection to UNFPA direct execution of Phase II MDTF project. Decisions There is a need to evolve a clearly defined process for associating MDTF-South OC with the processing of the Phase II FPP. The process would be defined by the MDTF TS South in consultation with the MDTF TS North such that OC South remains fully informed and involved in the appraisal and approval process in the North. The advice of UNFPA and UNOPS that January 2008 appeared a more practical and appropriate time for the census as compared to the original schedule for November 2007 was noted. 9. FPP for Private Sector Development a. The FPP was presented by HE the Minister for Mining and Industry. The FPP proposes a Phase I outlay of $11.06 million, of which $6.78 million or 61% is the MDTF component and $4.28 million or 39% is the GoSS component. Phase II has an outlay of $8.14 million and the total project is to be implemented over a five year period from The project is to be implemented by the Ministry of Commerce, Trade and Supply, Ministry of Industry, Mining and Energy, Bank of Southern Sudan and Central Equatoria Ministry of Commerce, Trade and Supply. It aims to develop an enabling policy environment for PSD, provide access to microfinance, build capacity, and develop markets along PPP lines. Presentations by the Bank of Southern Sudan, Central Equatoria Ministry of Commerce, Trade and Supply and HE the Minister for Finance, Central Equatoria, detailed the intensive study, consultations and deliberations which had gone into design of the project. b. Director, Aid Coordination, MoFEP confirmed that the issues raised earlier by IMAC had been addressed in the revised version of the FPP though there was some concern over the concentration of market development activities in Juba. c. EC asked if there was a defined budget allocation to the proposed assembly markets under the wholesale market component, how linkages would be ensured to other relevant projects, for example in rural livelihoods, and urged that funding should be adequate for the proposed market price discovery and dissemination mechanism, asking what dissemination methods were envisaged. The project team responded that each feeder market was expected to cost at least $200,000. If the Juba wholesale market cost less than anticipated, additional funds could be available. 9

10 d. Canada and JDT endorsed the project design and felt it could be further fine tuned during implementation. HE Gabriel Changson Chang urged that the project be approved since the project had been extensively discussed and revised and it was the only MDTF intervention addressing the crucial subject of PSD. Decision The FPP was approved and the project team was congratulated on the thorough job done in project preparation. EC would provide detailed comments (Annex 5) which would be taken into account while implementing the project. The MDTF, GoSS and donors will continue to communicate actively as the implementation phase gears up. 10. FPP for New Unified National Currency Project a. The Bank of Southern Sudan presented the FPP to the OC. The project had already been approved by the OC for MDTF-North. MDTF-South is expected to contribute $15 million to this project for which the total outlay is about $160 million, the bulk of which will be financed by GoNU with $15 million being contributed by MDTF-North and $16 million by other donors. The key development objective is to introduce a new national currency, the Sudanese Pound, and thereby positively impact monetary policy, boost commercial activity by reducing transaction costs and assist in national economic integration and development. b. IMAC had recommended the project with some comments regarding the need to ensure an adequate supply of coins and the adequacy of the monitoring and evaluation arrangements. The Bank of Southern Sudan informed that the implementation of the project was going well. Southern Sudan had been divided into three zones for currency exchange and the program was ongoing. They have faced some problems with receipt of counterfeit bills but have acquired some validating machines to work around that problem. An early release of MDTF-South funds would accelerate the pace of activities. c. The proposal received strong support from the Chair who identified several benefits arising from the project. A common legal tender would simplify transactions and reduce cost. The process of currency exchange itself is bringing out the level of counterfeit notes in circulation. Together with adoption of a single legal tender, expansion in the use of the banking system for collection of tax is likely to have a salutary effect on revenues. The project is of National importance and will unify the entire country and thereby meet the objectives of the CPA. Decision The FPP was approved and the project team was congratulated on their presentations and the speed with which they had managed to put the project proposal together. 11. Approval of CY 2007 budget for MDTF-TS a. EC congratulated the TS on making available a significant number of highly specialized staff in Juba. However, many of the implementation issues required persistent but low level 10

11 follow up. Accordingly it was suggested the staff profile should also include a mix of staff levels for such day to day follow up. The MDTF TS welcomed the suggestion, and undertook to bring to the OC any changes in the staff profile and budget requirements to meet the program needs. Decision The CY 2007 budget of $7.163 million for the MDTF- S Technical Secretariat was approved. 12. Any other business: The following agenda items were flagged for future deliberations: Community Driven Development South Sudan Reconstruction and Development Fund Agriculture and Forestry FPP after it has been reviewed by IMAC Project Preparation Facility for the HIV/AIDS IPP 13. The meeting closed with a vote of thanks for the Chair and Co-Chair, who reiterated their commitment to work as a team with the OC members for implementing the reconstruction and development agenda for Southern Sudan. 11